It’s sometimes referred to as the Wild West period of the trading day for its volatility, but extended-hours trading is about to get longer on at least one platform.
Online broker TD Ameritrade is set to offer its retail clients the ability to trade 24 hours a day, five days a week — a move which is likely to be followed by rivals.
Regular trading hours on the New York Stock Exchange, Nasdaq and other exchanges run from 9:30 a.m. to 4 p.m. Eastern, but the stock market is also open during extended periods, from 4 p.m. to 8 p.m., and during premarket hours, from 4 a.m. to 9:30 a.m.
TD Ameritrade AMTD, +0.38% said it wants to close the gap between regular hours and extended hours for qualified investors, starting from 8 p.m. Eastern on Sunday to 8 p.m. Friday. The move also is an attempt to grow its business in Asia.
Steven Quirk, executive vice president of TD Ameritrade’s Trader Group, told MarketWatch that customer demand has been one of the key impetuses for extending its trading hours, especially since the online brokerage already offers access to research and data 24/7.
“It’s like having a restaurant open and you can see the menu but you can’t order,” said Quirk. “They are complements to each other, if I can give you the technology and a lot of people are using it, I should certainly be giving you the ability to do something with it,” he said.
The addition to trading hours also comes as stocks are gaining in popularity globally, at least by virtue of the recent records equity benchmarks have carved out already in 2018, even as bears warn that valuations are too rich. The S&P 500 index SPX, +0.44% and the Nasdaq Composite Index COMP, +0.55% finished trade on Friday at all-time highs, while the Dow Jones Industrial Average DJIA, +0.21% ended not far from its own record, holding above a psychologically important level at 26,000.
Technological improvements involving electronic communications networks at online brokers like TD Ameritrade, Charles Schwab Corp. SCHW, +0.27% and others have made offering trading outside of normal hours easier.
However, off-hour, or after-hours, trading can come with perils for average investors due to a lack of liquidity and sharp price swings that can occur during those periods. This lack of liquidity can mean wider spreads between bids and asks, referring to the maximum price that a buyer will pay and the ask, the lowest price at which an investor is willing to sell.
Check out the Securities and Exchange Commission’s outline of risks associated with after-hours trade here.
TD Ameritrade said it would start out allowing off-hour trade in 12 widely held U.S.-listed exchange-traded funds using limit orders to protect against potential losses. The tickers include the iShares China Large-Cap ETF FXI, +1.66% SPDR S&P 500 ETF Trust SPY, +0.45% iShares MSCI Emerging Markets ETF EEM, +0.82% SPDR Gold Shares GLD, +0.44% iShares Silver Trust SLV, +0.50% SPDR Dow Jones Industrial Average ETF Trust DIA, +0.20% and PowerShares QQQ Trust Series 1 QQQ, +0.31%
The company hopes to expand that list over time.